benefits to activities in low income communities

Many businesses and nonprofit organizations located in low or moderate income areas qualify to receive an enhanced loan or equity investment from a CDE that has an allocation of NMTCs. Each CDE has a unique strategy to maximize the economic impact of its NMTC allocation upon the low income communities that it serves.

Since the investor's rate of return is subsidized by the tax credits, the investor is able to make loans and equity investments to qualified organizations at very favorable terms. For example, the interest rate on an NMTC enhanced loan may be as much as 2 percent to 3 percent below market. Alternatively, a portion of the loan principal may be forgivable. Many real estate developers are also combining historic tax credits with NMTCs to enhance the equity contribution that the tax credit investor is willing to make to the project by approximately 25 percent.